Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): A Coram of Justice A.I.S Cheema (Judicial Member) and Justice Balvinder Singh (Technical Member) set aside the judgment passed by National Company Law Tribunal, Hyderabad Bench (NCLT) and directed the cancellation of entry of the name of appellant in the register of member of respondent 2 showing equity shares purported to have been credited on the basis of conversion of Compulsory Convertible Debentures (CCDs) standing in the name of appellant.

In the present case, appellant company had filed a Company Petition claiming rectification in the register of member of respondent-company, seeking cancellation of entry of the name of petitioner in the Register of Members of respondent-company showing 906599 equity shares purported to have been credited on the basis of conversion of 906599 CCDs standing in the name of the petitioner. The aforementioned Company Petition under Section 59 of the Companies Act, 2013 was then dismissed by NCLT, Hyderabad claiming that the issues raised were complex and could not be dealt with by NCLT. NCLT ruled that in Ammonia Supplies Corpn. (P) Ltd. v. Modern Plastic Containers (P) Ltd., (1998) 7 SCC 105 it was held that in case of a serious dispute as to title, the matter could be relegated to a civil suit. Aggrieved by the said order, the instant appeal was filed.

Learned counsel for appellant Arun Kathpalia, argued that after passing of Companies Act, 2013 the aforementioned case did not hold good in the light of the bar on civil courts. He submitted that in Shashi Prakash Khemka v. NEPC Micon, 2019 SCC OnLine SC 223 the Supreme Court had held that after Companies Act, it is not in dispute that were a dispute to arise today, the civil suit remedy would be completely barred and the power would be vested with the NCLT under Section 59 of the said Act”.

Further, Section 430 of the Companies Act, states that “Civil court will not have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate.”

On the basis of above arguments and in view of the law laid down in NEPC Micon case, it was held that NCLT had jurisdiction to deal with all the cases which dealt with questions regarding rectification and all questions incidental and peripheral to rectification, for the purpose of deciding the legality of the rectification. It was opined that in the present matter, there were really no complex questions involved and even if it were then the same had to be decided by the NCLT and in appeal, this Tribunal was bound to consider whether or not entry made in the Register of Members could be upheld

Hence, the impugned judgment was set aside and cancellation of entry of the name of the appellant in the register of members of respondent 2 showing equity shares purported to have been credited on the basis of conversion of CCDs standing in the name of the appellant was directed.[MAIF Investment India PTE Ltd. v. Ind-Barath Power Infra Ltd., 2019 SCC OnLine NCLAT 203, decided on 28-05-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): The Board comprising of Madhabi Puri Buch (Whole Time Member) passed the direction to the directors of the company, Kaizar Biswas,  Mohammed Jiaur Rahaman, Ajijur Rahaman,  Abu Sama Molla, Ashraful Hoque and Sariful Islam to pay the Equity Share amount of maturities of the schemes/policies/plans and shares/debentures/bonds issued by the Company to the public at large.

SEBI observed that Prayas Projects India Limited had engaged in fund mobilization activity from the public through its offer and issue of Secured Redeemable Non-Convertible Debentures which violated the provisions of the Companies Act, 1956, SEBI Act read with SEBI (Issue and Listing of Debt Securities) Regulations, 2008.

In the instant matter where it was submitted by the director that the Equity shares were issued to the close relatives and family members and the number of members were less than 50, will not constitute the violation of Section 67(3) of the Companies Act. Reference was made to order dated April 28, 2017 of Securities Appellate Tribunal in Neesa Technologies Ltd. v. SEBI, 2017 SCC Online SAT 187 which lays down that “In terms of Section 67(3) of the Companies Act any issue to ‘50 persons or more’ is a public issue and all public issues have to comply with the provisions of Section 56 of Companies Act and ILDS Regulations. Accordingly, in the instant matter, the appellant has violated these provisions and their argument that they have issued the NCDs in multiple tranches and no tranche has exceeded 49 people has no meaning”.

The Tribunal made the Company and the then directors of the company to refund the money through Demand draft or Pay Order through the issuance of Equity Shares including the application money collected from investors during their respective period of directorship, till date, pending allotment of securities, if any, with an interest of 15% per annum, from the eighth day of collection of funds, to the investors till the date of actual payment. The certified report by the Chartered Accountants should be filed with the SEBI in 3 months from the date of order. The restriction is also imposed on the director to access the securities market or related activities for the 4 years from the date of the order.  On non-compliance of the order, directors would be liable to refund in accordance with Section 28-A of the SEBI Act including such other provisions contained in securities laws.[Prayas Projects India Ltd., In re, 2019 SCC OnLine SEBI 39, Order dated 24-04-2019]